Criticism of Putin's tax plans: Small businesses in danger!

Criticism of Putin's tax plans: Small businesses in danger!

The economic situation in Russia is characterized by constant turmoil, and the latest developments clearly show how serious the Kremlin's finances are. With the 2025 budget recording a significant deficit of 5.7 trillion rubles, Russian authorities are planning major tax increases that will have far-reaching consequences for businesses in the country. Vladimir Putin's measures to stabilize finances are encountering great resistance from business associations and company representatives. Sergei Borisov, head of a lobbying group for small businesses, calls the plans a “shock for all small businesses” and warns of the slow but huge impact on small and medium-sized businesses.

The planned introduction of VAT liability for companies with an annual turnover of over 10 billion rubles is particularly viewed critically. In addition, IT companies are to be excluded from tax breaks, which will further exacerbate the already tense situation in the corporate sector. Over 700,000 entrepreneurs, i.e. one in ten in Russia, are affected by the tax increases. In a survey of more than 11,000 entrepreneurs, a third said they would close their business if the tax increases occurred. This raises questions about what will happen to entrepreneurship in Russia, as one in four respondents also plans to lay off employees, which could put additional strain on the already struggling economy.

Tax increases and their consequences

The government's plans include not only the measures mentioned above, but also a general increase in corporate taxes - the corporate tax rate should rise from 20 to 25 percent. Income tax will also be increased in stages, which will place an additional burden on higher earners in particular. Incomes between 5 and 20 million rubles (around 51,000 to 206,000 euros) will rise from 15 to 18 percent, while incomes of 50 million rubles or more will face a top tax rate of 22 percent. These tax hikes are the largest under Putin's rule and are estimated to raise 27 billion euros annually.

The government justifies the increase with the enormous deficits that have arisen since the start of the Ukraine war. Ministries have found that government spending has exceeded revenue since February 2022. In 2022 and 2023, the deficits will total around 68 billion euros, and the reserves in the National Prosperity Fund have shrunk by around half, so that only around 50 billion euros are currently available. These reserves have been used to cover the budget deficit, which is particularly worrying should the crisis worsen.

Entrepreneurs worried

The concerns of entrepreneurs are understandable. Irina Pankratova, a studio owner, criticizes the tax increases as unfair, while Sergei Pakhomov, a grocery store owner, also voices his concerns. The rising costs and viability of its businesses are in jeopardy. Business associations warn that the tax increases will particularly hit small companies, which could ultimately endanger the Kremlin's tax revenue. These developments highlight the fragility of the Russian economy and the uncertainty that entrepreneurs will face in the coming months.

In summary, it can be said that the Kremlin faces enormous challenges. While the tax increases are already on the agenda, it remains to be seen how the affected companies will react to these obvious burdens. The pressure on small business owners could ultimately lead to the closure of many businesses and have further negative consequences for the economy. The Kremlin's plans for the coming years look bleak, and without timely adjustments this could mean the end of many small businesses.